EDITORIAL: More Australian industries to be sacrificed

by Peter Westmore

News Weekly, December 13, 2003

With great fanfare, the Federal Minister for Industry, Mr Macfarlane, has announced that the Federal Government will allocate $747 million over a ten year period, from 2005 to 2015, to Australia's textile, clothing and footwear (TCF) industries, to help them adjust to reduced protection from the year 2005.

At first sight, the amount seems huge. But when it is remembered that these industries generate revenue in excess of $9 billion a year, that the Federal Government received around $950 million in tariffs on imported TCF goods in 2001-02 alone, and that the Federal Government allocated $678 million in structural adjustment from 2000-2005, the government's latest measure takes on a different character.

Many of the imports of clothing, textiles and footwear come from countries with very low labour costs - such as China and India - so it is obvious that without continuing government support, these industries will collapse.

In this respect, Australia is no different from most other countries of the world.

(Interestingly, China and India are countries which impose among the highest levels of import duties for manufactured clothing, with rates ranging from 40 to 50 per cent.)

Most of the nations of the industrialised world - including the countries of the European Union and the United States - also limit imports by quotas, or have other non-tariff barriers.

Australia currently has tariffs ranging from 25 per cent for clothing and finished textiles, 10 per cent for footwear, down to 5 per cent for textile yarns, and zero tariff on unprocessed wool. Australia imposes no quotas to limit imports.

Additionally, many of our international competitors also directly subsidise production.

For example, the Productivity Commission reported that "the South Korean Government is providing US$600 million towards the 'Milano Project', a program designed to establish the city of Daegu as a major textile and clothing manufacturing centre.

"The Indian Government plans to spend US$6 billion to modernise its textile and clothing sector."

Yet despite these realities, the Productivity Commission report shows a naive faith in the prospects of export opportunities emerging through the World Trade Organisation (WTO), APEC, and bilateral trade deals.

It says, for example, "Removal of EU and US textile and clothing quotas may create new export opportunities ... as would reductions in tariffs and other trade barriers [while] mooted free trade agreements may benefit some TCF producers" (emphasis added), and on the basis of these possibilities, it proposed further cuts in levels of support for these important Australian industries.

Since the late 1980s, there have been consistent efforts to cut assistance to the TCF industries in Australia, as part of successive governments' free trade agendas.

Under the latest plan, developed by the Productivity Commission and endorsed by the Federal Government last month, tariffs on all imported goods will fall to just 5 per cent by 2015, although our overseas competitors will continue to protect their own industries.

There can be no doubt that this will savagely affect these industries in Australia, which have already suffered massive plant closures and job cuts over the past 15 years, as tariffs have been cut.

Since the Keating Government commenced the wholesale abandonment of support for Australian industry in 1990, imports have risen from less than 30 per cent to over 50 per cent of total market share, according to the Productivity Commission report (Ch.2, p.12).

In spite of this, the report shows that these industries remain an important part of Australia's manufacturing base.

"Despite considerable rationalisation and restructuring, it remains one of Australia's larger manufacturing sectors. Australian TCF producers generated revenue in excess of $9 billion in 2000-01, with the sector accounting for 4 per cent of value added and 6 per cent of employment in broader manufacturing". It employs at least 75,000 people directly, and many thousands more indirectly.

At a time when Australia's balance of payments faces a looming crisis, due to excessive imports, it seems inconceivable that the Federal Government has just endorsed a report which - as the Productivity Commission readily admits - will cause the extinction of parts of these industries, forcing the loss of thousands of jobs.